Will The Recent Reduction in Corporate Tax Impact The Domestic Solar Market Too?

With an aim to provide much needed support to boost manufacturing sector in the country and to make them more competitive in the global market, Finance Minister Nirmala Sitharaman,in September, announced a significant reduction in corporate tax rate from 30 percent to 22 percent and for new manufacturing companies to 15 percent. Here are some views and voices from the solar industry on its impact:

Samarth Dakshini, Director, Raydean Industries

The recent reduction in corporate tax would leave a huge positive impact on the domestic market, especially for the renewable industry, which is currently grappling from a drastic reduction in prices because of high competitiveness. 15 percent tax rate for new manufacturing industries will promote the setup of new manufacturing plants, which will enhance the manufacturing capacity of solar energy systems which is the need of the hour to fulfill the ambitious target of 175 GW renewable energy capacity of Narendra Modi government.

Animesh Damani, Managing Partner, Artha Energy Resources

I believe that the government’s recent move to reduce corporate tax is a positive move that will bring the solar and wind sector several benefits. First, new manufacturing units will only be taxed at 15 percent. This will incentivize the establishment of new Indian manufacturing facilities, which in turn, will increase the demand for solar rooftops. Second, Minimum Alternate Tax (MAT) has reduced from 18.5 percent to 15 percent. This will benefit the solar and wind sector because most developers and independent power producer’s (IPP’s) tend to use accelerated depreciation as a tax saving instrument. With MAT reducing to 15 percent, it will leave more cash on the books for these developers which in turn improve the net-profit margins and Internal Rate of Return’s (IRR’s). Both these changes will help the solar space go a long way.

Vivek Kumar Jain, Chief Financial Officer, Patanjali Renewable Energy

To understand the impact better we should evaluate it in two segments, manufacturing companies and non-manufacturing companies. If you see earlier the tax rate for both the industries was 34.94 percent after inclusion of surcharge and education cess. However, for non-manufacturing companies, it was less due to availability of certain exemptions. So, if you see from the point of view of the existing manufacturing industries, the relief is less as compared to non-manufacturing industries. This is because earlier their tax got reduced by availing certain tax exemptions which are not available in the new tax structure, but on the other hand it will be helpful for promoting “MAKE IN INDIA” campaign as it will boost the manufacturers across the globe to set up their manufacturing units in India which ultimately will contribute towards the growth of the Indian Economy. Being into a manufacturing segment, we shall take this as an opportunity and will comply with it positively. We are confident this will help solar industries to move in the right direction with speedy execution of projects and enable government to achieve their infrastructure growth targets.